Psychologie a chování
Chasing Performance: Why Buying Last Year's Top Performer Is a Trap
Key takeaways
- Performance chasing — buying what went up most last year — is a statistically proven mistake that reduces long-term returns.
- The brain treats recent performance as a prediction of the future, but markets regularly invalidate that logic.
- Investors who jump from fund to fund chasing performance buy high and sell low — exactly the opposite of what they should do.
- The solution is simple but psychologically hard: hold a diversified ETF regardless of which sectors are hot, and use DCA.
- Every year a different sector is the "best" — whoever buys based on past results always arrives too late.
Performance chasing is the tendency to buy funds or stocks that have risen sharply in the recent past — and it is one of the most documented and costly mistakes investors repeatedly make.
What the mistake looks like in practice
Technology stocks in year X gained 50%. Friends are talking about it, media write headlines. Investor A, who until now held a diversified global ETF, sells and moves into a technology ETF. In year X+1 technology corrects 30%, while his original portfolio barely moved. Investor A not only missed the gain but also paid taxes and fees for the switch.
Why our brain leads us there
It is a combination of two cognitive biases:
- Availability heuristic: Recent and dramatic events (record gains) seem more likely to recur than they actually are.
- Trend extrapolation: The brain naturally assumes that what has been rising will keep rising — in nature this makes sense, in markets less so.
- FOMO (fear of missing out): The fear of missing the train triggers fast, uncritical decisions.
Yet statistics are clear: past fund performance has no statistically reliable predictive value for future performance. Every year a different sector leads — technology, energy, healthcare, emerging markets. Whoever chases the winner is always one step behind.
What to do instead
The strategy is simple but psychologically hard: choose a diversified, low-cost ETF (for example a global equity index) and hold it regardless of what is in vogue. Regular DCA — cost averaging — removes the need to "time the market" entirely from this strategy.
How to recognize that you are falling into the trap
Red flag: you are checking performance rankings and thinking about moving money after a sector's record year. Green flag: you have a plan based on your time horizon and risk tolerance — not last year's results. More on the psychological foundations of investing in the blog section.
This article is educational in nature and does not constitute investment advice.
FAQ
What is performance chasing?
The tendency to buy funds or stocks that have recently posted high returns, expecting that trend to continue. Research shows this strategy on average produces lower returns than a passive approach.
How can I protect myself from performance chasing?
Set an investment plan with a clear strategy (e.g. global equity ETF, regular DCA) and whenever you feel the urge to buy a "hot" fund, ask yourself: is this part of my plan, or am I reacting to media hype?
Is it possible for last year's winner to win again next year?
Yes, but statistically it is rare and unpredictable. Every year a different sector or market leads. The system of chasing performance only works in hindsight, not going forward.
Does this apply to crypto FOMO as well?
Exactly. FOMO — fear of missing out — is the fuel of performance chasing in every asset class. The rule applies equally to ETFs, stocks, and crypto: buying after a media peak rarely ends well.